Despite lower closes on Friday for the most widely followed indices, the S&P 500 still posted a weekly gain. For the S&P 500 it was its eighth weekly gain in nine weeks. The Dow industrials had their first weekly loss in three weeks. Losses in stocks and metals were blamed on a higher U.S. dollar due to lower retail sales in Germanyand high unemployment in Spain.
At the close, the Dow Jones Industrial Average was off 3 points at 12,978, the S&P 500 fell 4 points to 1,367, and the Nasdaq lost 13 points at 2,976. The NYSE traded 699 million shares and the Nasdaq crossed 454 million. On both exchanges, decliners outnumbered advancers by 2-to-1.
The gradual, low-volume, boring daily advances might not conform to everyone’s idea of the ideal bull market, but you can’t argue with the success. This week, the S&P 500 added 0.3%, the Dow was flat, and the Nasdaq added 0.4%. Year to date, the Dow is up 6.2%, the S&P 500 has gained 8.9%, and the Nasdaq has a flashy 14.2% gain. Not bad for a dull market.
The next barrier for the S&P 500, which has not yet been clearly breached, even though a daily top of 1,374 was made, is 1,370 — an important three-year top. The first major support for the S&P 500 rests at its 20-day moving average at 1,357 and the July top at 1,356.
As for the Nasdaq, the next technical target is 3,120, which is approximately the 50% retracement point of the Internet crash. And even though the index is overbought and on a steep uptrend line (see the Feb. 29 Daily Market Outlook), it continues to outpace the other indices by a wide margin driven mostly by the technology and banking sectors.
The Dow Jones Industrial Average still must convincingly break the 13,000 mark to maintain momentum. Like the S&P, it has flatlined at a major number, but it has another problem: The Dow Jones Transportation Index has failed to make a new high. The transports are clearly the victim of higher energy prices, and Dow theorists are not happy about that. But if energy falls, then Q2 could be very kind to the Dow complex with the transportation index quickly machining up the lost momentum.
The U.S. dollar put on a spectacular show this week, rising from the major support at the conjunction of its bullish support line and 200-day moving average. It then followed that reversal with an impressive gap through its 20-day moving average following a stochastic buy signal.
The dollar appears headed higher, and that could slow stocks, gold, and a host of other commodities, including crude oil. In fact, it could be the catalyst for a quick round of profit-taking. But after that is over, look for the trends in equities and gold to continue. The near-term trends are about to be determined by the greenback.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
